The tech media is starting to talk about the arrival of designer domain names from the Internet Corporation for Assigned Names and Numbers (“ICANN”), which oversees the development and administration of Internet domain names under its contract with the US Department of Commerce Because these changes may raise significant concerns for our business customers, we explain some of the relevant topics below.

For several years, ICANN has been promulgating rules and soliciting feedback on the use of custom top-level domains (“TLDs”) (read “brand-specific”).[brand] Prayed .[industry]) to expand Internet real estate beyond .com and its lesser-used alternatives by December 2009. An Applicant’s Guide has approved its second draft. ICANN solicited comments from domain name stakeholders, including government, the technology community, current domain name registrars (the database operators that market and lease the names), trademark owners ( that is, companies) and the legal groups that represent them, such as the International Trademark Association. (“INTA”).

By the end of January 2009, ICANN received over 1,000 comments, many of them highly critical of ICANN for moving too quickly to bring this paradigm shift to market and for what some perceive as an exorbitant cost. Custom domain names of this variety start at about $300,000 in ICANN charges and setup fees, compared to the $35 annual fee for the typical .com, assuming it’s available.

For example, these custom names would allow an airline to buy .delta or Smith & Wesson to buy .gun, but is there a business advantage to this? Will this scheme produce an additional crop of suffixes that companies must register defensively as is often done with .net and .org? Simple fakes like .kom and .bizz are already banned under ICANN rules, but what process or authority will decide whether to assign .delta to the airline trademark owner or its faucet maker counterpart; .austin to city or car manufacturer; .mayo to the clinic, the county, or the condiment manufacturer? may .[your religion] be registered in the name of a non-member or fall into the hands of a group with opposing views? Religious leaders have already begun to comment. Do legitimate business applicants lose out to cyber speculators who then hold auctions against each other? Is the purchase of a custom domain name a “deal”, resulting in marketing managers being first in line to purchase your .[brand] Prayed .[industry] as a back door to expand market share? Should risk-shy managers in this weak economy say “no deal” to an untested change that depletes already limited funds?

Part of ICANN’s risk analysis should include the effect that a change to unrestricted domain names will have on the current list of 14 simple ASCII gTLD suffixes (of which .com, .org and .net represent 91% of all gTLD registries) and approximately 230 two-letter country code ccTLDs. Trademark owners have criticized ICANN’s process thus far for failing to provide safeguards or “rights protection mechanisms” to protect marks from malicious or fraudulent registration. In the past, for example, there were dawn periods that allowed trademark holders the first opportunity to obtain domain names incorporating their trademarks. Many also question whether the hefty expense is justified, aside from helping ICANN recoup its $13 million in additional expenses for Internet administration. Questions also remain about the effect this myriad of unique domain names would have on search engines. Security experts say policing malware and phishing will be more difficult across multiple domains. There are conflicting studies available on the Internet that come to conflicting conclusions about whether new domains will be more or less susceptible to attack. More importantly, trademark owners will not only have to watch out for someone trying to register their brand as a top-level domain, but also as a second-level domain linked to it, like delta.airline or macys.shopping. .

As with all things online, we’re cautiously optimistic that the market will ultimately settle the debate over whether new domains are worth the risk and expense. Efficient market decisions depend on market knowledge to accurately assess risk. Based on most feedback, it seems too early for business leaders to decide whether custom domain names are a deal, where the benefits outweigh the costs, or no deal, where exorbitant upfront costs and unanswered questions response outweigh the potential benefits of the market.